International Trade 2021

Last Updated December 11, 2020

Sweden

Law and Practice

Author



Mannheimer Swartling has an extensive international practice, with an especially strong focus on the Nordic region. The firm employs over 400 lawyers, based in offices in Sweden, Belgium, Russia, and the USA. The trade law practice consists of eight lawyers working together in the three Swedish offices as well as the Moscow and Brussels offices. It is organised under the corporate sustainability and risk management practice group, which systematically covers anti-corruption, data privacy, human rights, and anti-money laundering. The trade group has vast experience in trade matters, covering customs, national security and foreign direct investment screening, trade defence measures and export control and sanctions. The group regularly handles matters before various authorities, including complex classifications and voluntary disclosures, as well as litigation before Swedish and European courts. The group helps clients with risk assessments, compliance programmes and investigations; it has an extensive network of international trade law professionals in other jurisdictions.

Sweden is a member of the WTO. As a member of the European Union (EU), Sweden’s trade-related commitments are those concluded between the EU and other members of the WTO.

As a member of the EU, Sweden does not conclude any free trade agreements on its own. However, Sweden takes an active part in the preparations and negotiations led by the EU.

The EU actively engages with countries or regional groupings to negotiate trade agreements. These agreements grant mutually beneficial access to the markets of both the EU and the countries concerned.

For a full overview of the free trade agreements that Sweden, as a member of the EU, is a party to, as well as other free trade agreements that the EU is negotiating, please see the European Commission's Directorate for Trade.

Sweden does not conclude any other agreements and does not adopt any unilateral measures to reduce tariffs beyond those adopted in the EU.

However, Sweden does participate in regional partnerships – for example, Nordic Co-operation (Nordiskt samarbete) with deep roots in politics, economics and culture. In general, Nordic Co-operation focuses on areas where a Nordic approach generates added value for the countries and peoples of the region. The vision of Nordic Co-operation is to make the Nordic region the most sustainable and integrated region in the world.

Nordic Co-operation also examines questions such as trade barriers in practice – see, for instance, their report from 21 September 2020, "Trade in goods on equal terms? Customs and VAT in the Nordic region from a border barrier perspective” (“Varuhandel på lika villkor? Tull och moms i Norden ur ett gränshinderperspektiv”).

The EU has trade agreements in place with multiple countries/regions, and is currently negotiating various new agreements including an agreement with the UK, post-Brexit.

The key developments are those occurring at EU level, as Sweden does not conclude any free trade agreements on its own.

The pre-eminent topic on the horizon pertaining to trade policy matters is whether the negotiations between the EU and the UK will result in a free trade agreement by 31 December 2020. Sweden has a substantial volume of trade with the UK and will therefore be substantially affected by the outcome of those negotiations.

The administrative authority governing customs matters is the Swedish Customs Service (Tullverket).

Decisions by the Swedish Customs Service can be appealed to the administrative court (Förvaltningsrätten) in the first instance and the administrative court of appeal in the second instance (subject to leave of appeal). Although very rare that leave of appeal is granted, there is also a possibility to appeal also to the highest instance, the Supreme Administrative Court.

Additionally, the National Board of Trade Sweden (Kommerskollegium) handles certain trade licences and authorisations such as applications for duty suspensions and export licences.

The Swedish Customs Service has a special branch that enforces customs laws and regulations, and which may hand over cases to a prosecutor in case of suspected violations.

Swedish companies experiencing barriers when trading with other countries can report the issue to the National Board of Trade Sweden, which will investigate the reported issue and explore possible solutions. The National Board of Trade Sweden also has a more active role in approaching companies to collect information about any experiences of trade barriers.

Some of the most common trade barriers that the National Board of Trade Sweden investigates are high customs duties, discriminatory taxes, unjustified requirements for goods and services, and testing of already approved products and national standards.

When investigating trade barrier issues, the National Board of Trade Sweden co-operates with the Swedish Ministry for Foreign Affairs, the European Commission, trade associations, and Swedish embassies around the world.

Some trade barriers can be reported to the National Board of Trade Sweden’s free service SOLVIT, which companies and private individuals can turn to if, for instance, they encounter trade barriers within the EU (ie, the internal market).

Furthermore, companies from developing countries that want to start exporting to Sweden can contact Open Trade Gate Sweden, which is part of the National Board of Trade Sweden. Open Trade Gate Sweden is a one-stop information centre tasked with assisting exporters from developing countries interested in the Swedish market. In order to facilitate trade and increase exports from developing countries, Open Trade Gate Sweden provides information on rules and technical requirements as well as market information.

If companies from developing countries experience obstacles when trying to export to Sweden, they can report this to Open Trade Gate Sweden. Should Open Trade Gate Sweden find that a requirement or procedure is unjust or too bureaucratic, they will try to solve the problem by contacting the relevant authorities in Sweden. 

The Union Customs Code (UCC), which is the main legal framework for customs regulations and procedures within the customs territory of the EU, provides for a complete transition to a paperless environment for customs formalities. The purpose of the ongoing transition is to modernise and simplify customs administration, both from the perspective of companies and customs authorities. Swedish Customs Services are currently working on implementing changes. For instance, companies can now communicate electronically with the Swedish Customs through EDI (Electronic Data Interchange).

The UCC entered into force on 1 May 2016 and set an initial deadline of 31 December 2020 for the progressive completion of the work in terms of IT transition and implementation. However, the Council and the European Parliament adopted a regulation in April 2019 (Regulation (EU) 2019/632) establishing new deadlines of 2020, 2022 and 2025 for cessation of the use of transitional arrangements; therefore, the relevant electronic systems must be in place by the same deadlines.

Further, in January 2020, the European Commission published a decision helping member states affected by the COVID-19 pandemic to temporarily suspend customs duties and VAT on protective equipment, testing kits or medical devices such as ventilators.

In 2020, the Swedish Appeals Court in Göteborg referred a customs case to the European Court of Justice. Such cases are very rare in Sweden.

The most significant expected changes are the further development of e-customs and digitalisation. See 2.4 Key Developments in Customs Measures.

Sweden does not apply any unilateral sanctions regimes. Sweden implements and applies the sanctions regimes adopted by the United Nations Security Council and the EU.

The responsibility for the co-ordination of sanctions lies with the Ministry of Foreign Affairs (Utrikesdepartementet).

The Act on Certain International Sanctions (Lagen (1996:95) om Vissa Internationella Sanktioner) and a number of government decrees adopted on the basis of that Act contain complementing provisions on the implementation of international sanctions and embargoes decided by the UN Security Council and the EU.

Government agencies that administer or enforce sanctions include:

  • the Inspectorate of Strategic Products (Inspektionen för Strategiska Produkter. ISP), which has the main responsibility for handling export control and sanctions, including granting many types of export authorisations under sanctions regimes;
  • the Swedish public prosecutor’s office, which is responsible for the investigation of crime;
  • the National Board of Trade (Kommerskollegium), which is responsible for processing and deciding on applications for (i) certain types of export authorisations and (ii) exemptions from the freezing of assets and other financial resources for legal persons, as well as for matters under the EU Blocking Statute;
  • the Social Insurance Agency (Försäkringskassan), which is responsible for granting asset freezing exemptions for natural persons;
  • the Financial Supervisory Authority (Finansinspektionen), which is the competent authority receiving information concerning frozen accounts and, when applicable, granting exemptions from the prohibition for routine administrative costs; and
  • the Swedish Customs (Tullverket), which is responsible for monitoring imports and exports.

Sweden does not apply extraterritorial jurisdiction when ruling on sanctions cases, that go beyond what is stipulated in the EU sanctions regimes. The rules on the scope of sanctions criminalisation are the same as for other types of crimes and are set out in Chapter 2 of the Swedish Criminal Code (Brottsbalken), available in English at: the Swedish Criminal Code.

Sweden does not maintain any unilateral lists of sanctioned persons. The EU sanctions regulations that include such lists are directly applicable in Sweden. UN Security Council sanctions are generally implemented under Swedish law through sanctions regulations of the EU. However, under the Act on Certain International Sanctions, the Swedish government has a mandate to adopt decrees to implement UN sanctions.

Sweden does not maintain any unilateral comprehensive sanctions or embargoes against other countries or regions. Sweden applies the sanctions adopted by the EU, which are directly applicable.

Sweden does not maintain any other types of sanctions regimes beyond those adopted by the EU.

Sweden does not apply anything similar to US secondary sanctions.       

Under Swedish law, criminal acts can be committed by natural persons only. Corporations cannot face criminal liability.

The penalty for an intentional violation by a natural person of a sanctions provision ranges from a low fine to imprisonment up to four years. If committed with gross negligence, the penalty for a natural person ranges from a low fine to imprisonment for up to six months. However, an indictment for such offences will probably result in no more than a fine. The criminal provisions can be found in the Act on Certain International Sanctions.

There are no administrative penalties for companies that have transgressed sanctions laws. The corporate fine (Företagsbot), which is in fact levied on companies, is considered neither a criminal nor an administrative penalty. Instead, it is a specific form of legal construction, referred to as “a special legal effect of a crime” (särskild rättsverkan av brott). The corporate fine is contingent on the prosecutor being able to prove that a natural person in the company has committed a crime in the exercise of the company’s business activities (näringsverksamhet).

A corporate fine can be issued in relation to all crimes under Swedish law that can be committed in the exercise of a company’s business activities. Generally, the corporate fine is tried in the same criminal court procedure as the liability of the company representative or employee that has allegedly committed a criminal act. If the defendant (ie, the accused company representative or employee) is acquitted – for instance, because the prosecutor fails to prove intent or gross negligence – the company would also be cleared since no prerequisite crime has been committed.

As of 1 January 2020, the cap on corporate fines in Sweden, previously at SEK10 million, increased to SEK500 million (approximately EUR50 million).

Sweden has not adopted any unilateral general licences which authorise activities that would be otherwise prohibited under EU sanctions regulations.

The compliance expectations of the responsible Swedish authorities are in line with what follows from the official EU guidance documents, such as the EU Best Practices for the effective implementation of restrictive measures.

As regard to standards of liability, please refer to 3.9 Penalties for Violations. As Sweden does not have any administrative penalties for sanctions violations, the standards of liability are equal to those applicable to natural persons under general criminal law (intent or gross negligence with the responsible individual).

Except for the requirements and prohibitions under the EU Blocking Statute, Sweden does not maintain any sanctions-related blocking or reporting requirements.

Provisions on the implementation of the EU Blocking Statute, including criminal provisions, can be found in the so-called Act on the EU’s Regulation on Protection against Extraterritorial Legislation Adopted by Third Countries (Lagen (1997:825) om EG:s förordning om Skydd mot Extraterritoriell Lagstiftning som Antas av Tredje Land) and a government decree (1997:83) adopted on the basis of that Act.

Besides the EU Blocking Statue, Sweden does not have any anti-boycott regulations or other restrictions that prohibit adherence to other jurisdictions’ sanctions.

There are no key developments in law, regulatory activity, enforcement, or litigation in the prior 12 months related to sanctions. However, there has been some media attention on EU and US sanctions and potential sanctions violations in relation to Swedish banks failure to conduct anti-money laundering due diligence on customers and transactions related to Russia.

Further, many banks have adopted strict internal policies on transactions relating inter alia to comprehensively sanctioned countries such as Iran and Syria, resulting in very strict compliance requirements on the banks customers.

There are several pending EU sanctions regimes, which have recently been implemented or are pending implementation. For example, the EU sanctions regime for violation of human rights is expected to be an important development on the Swedish market.

As the respect and protection of human rights is central to Sweden’s foreign policy profile, the political support of an EU global human rights sanctions regulation is broad. The author believes that such an EU regulation would result in more focus, both from Swedish politicians and from the media, on sanctions and restrictive measures as a foreign policy tool. This, in turn, would likely result in more sanctions enforcement actions from the responsible Swedish authorities.

Sweden is an export-dependent economy, with many prominent export companies. The majority of these companies have internal sanctions compliance programmes based on country lists, under which enhanced due diligence in the form of sanctions screening is required only for exports to countries considered of particular risk. The recently expanded use of thematic EU sanctions regulations, together with the expected new EU global human rights sanctions regulation, could – in the long run – topple this kind of risk-based approach, resulting in the need for a more comprehensive and automated transaction and business partner sanctions screening.

Swedish export control laws and regulations include the Military Equipment Act (Krigsmateriellagen) and the Council Regulation (EC) No 428/2009 of 5 May 2009 setting up a Community regime for the control of exports, transfer, brokering and transit of dual-use items (the “EU dual-use regulation”). The EU dual-use regulation is complemented in Sweden by the Act on Control of Dual-use Items and Technical Assistance (Lagen (2000:1064) om Kontroll av Produkter med Dubbla Användningsområden och av Tekniskt Bistånd).

Sweden has not chosen to impose any authorisation requirements for the export or transfer of other dual-use items than those listed in the annexes to the EU dual-use regulation, as provided for in articles 8 and 22 of the EU dual-use regulation.

The Swedish Military Equipment Act is in large the same as in the EU Common Military List.

The main administrative authority for export controls is the Inspectorate of Strategic Products. As regard dual-use controlled encryption, the ISP works together with the National Defence Radio Establishment (Försvarets Radioanstalt, FRA).

For nuclear-related items, the responsible authority is the Swedish Radiation Safety Authority (Strålsäkerhetsmyndigheten).

The ISP is the authority responsible for enforcing export controls, except for nuclear-related items, which fall under the competence of the Swedish Radiation Safety Authority. However, if the ISP suspects that actions would constitute criminal acts, the ISP can hand over a case to the Swedish public prosecutor’s office.

The Swedish Customs also has certain monitoring and enforcement responsibilities in relation to export controls.

Sweden does not apply extraterritorial jurisdiction in relation to export control. The Swedish laws and regulations are not applicable on re-exportation of Swedish origin items in or between foreign countries.

However, a non-Swedish entity wanting to re-export controlled items procured from Sweden may be restricted in doing so according to guarantees given in an end-use certificate – for example, by reference to commitments to obtain written consent from the competent Swedish authority.

Sweden does not maintain any publicly available lists of restricted persons for export control purposes. Nonetheless, the ISP may – on a case-by-case basis – deny export authorisations to specific entities that the ISP considers sensitive.

Sweden does not maintain any lists of sensitive exports beyond what is set out in EU legislations.

Except for the catch-all provisions in Article 4 of the EU dual-use regulation, Sweden does not maintain any non-listed export controls.

Under Swedish law, criminal acts can be committed by natural persons only. Corporations cannot face criminal liability. (See also 3.9 Penalties for Violations.)

The penalty for an intentional violation by a natural person of an export control provision ranges from a low fine to imprisonment up to six years. If committed with gross negligence, the penalty for a natural person ranges from a low fine to imprisonment up to two years. However, an indictment for such offences will probably result in no more than a fine.

Sweden has not adopted any unilateral general export licences for dual-use items, but relies solely on the general licences set out in the EU-dual use regulation.

As regard to military equipment, there are five general licenses available (TFS 2012:7-11). However, it should be noted that all general licences include conditions that have to be met, including that the exporter already has a manufacturing or supply authorisation from the ISP.

The compliance expectations of the responsible Swedish authorities are in line with what follows from the official EU guidance documents, such as the Commission Recommendation (EU) 2019/1318 on internal compliance programmes for dual-use trade controls, and the Wassenaar Arrangement Best Practice Documents (available at www.wassenaar.org/best-practices).

As regard to standards of liability, please refer to3.9 Penalties for Violations. As Sweden does not have any administrative penalties for export control violations, the standards of liability are equal to those applicable to natural persons under general criminal law (intent or gross negligence with the responsible individual).

No matter whether or not a violation of export control law is deemed a criminal offence, the competent authority has a broad discretionary right to withdraw or deny export authorisations for companies with deficient compliance records.

In Sweden, there are several reporting requirements relating to the export of dual-use items and military equipment. Such requirements include notifying the ISP on the use of any EU general licence, and annually reporting to the ISP the total export value of dual-use items. It is also common that global and individual export licences include various reporting obligations.

The discussion on a new and reformed dual-use regulation has been discussed in Sweden and will have some impact. Further, many economic operators face challenges of complying with both EU and US export control and sanctions provisions at the same time.

The ongoing legislative process on a new EU dual-use regulation, and the parallel legislative developments regarding national security, are of specific relevant for Swedish companies operating in the field of export control. For example, Sweden will update its Protective Security Act, which in many instances will target companies involved in export control.

As Sweden is a member of the EU, the European Commission is the authority responsible for investigating dumping claims and imposing trade defence measures.

The European Commission monitors measures to ensure these are effective and respected by exporters and importers.

In order for the Commission to ensure the proper enforcement of measures, it is necessary that member states monitor – and report to the Commission on – the import trade of products subject to investigation or subject to measures, as well as the amount of duties collected under Regulation (EU) 2016/1036 of the European Parliament and of the Council of 8 June 2016 on protection against dumped imports from countries not members of the EU.

In Sweden, the Swedish Customs Service is responsible for monitoring and reporting breaches to the Commission, and collecting such duties. In case of a suspected violation of AD/CVD duties, Swedish Customs Service may perform inspections, audits or raids at importing companies' premises. Often such cases will end up as parallel judicial reviews – that is, criminal proceedings for persons involved and administrative proceedings for the company.

The European Commission opens an investigation after receiving a complaint from the European producers of the product concerned. However, the Commission can also open an investigation on its own initiative.

Complaints for new investigations may be initiated by EU producers on an ad hoc basis. Regarding requests for an expiry review, during the final year that measures are in force, the European Commission services publish a notice of impending expiry in the Official Journal stating that the measures will expire on a given date. If EU producers wish to request a review, they must do so no later than three months before the date of the expiry of measures.

Anti-dumping and anti-subsidy measures normally expire automatically after five years, unless it is determined in an expiry review that measures should remain in force.

Following the initiation of an anti-dumping or anti-subsidy investigation, the EU-producers and all other interested parties (having registered as interested parties within the framework of the investigation) will have an opportunity to participate in the investigation.

Interested parties consist of all economic operators which are directly or indirectly potentially affected by any measures. This mainly concerns exporter(s) in the country(ies) targeted by the investigation, as well as the domestic producer(s) in the country having initiated the investigation.

An investigation officially starts with the publication of a notice of initiation published in the Official Journal of the European Union. Following the initiation, known producers and all other interested parties will receive forms or questionnaires to be completed by a specific deadline as indicated in the notice of initiation. In investigations involving many producers, sampling will be applied. In practice, this means that companies will be asked to provide data on production, sales, employees, etc, to allow the European Commission to choose a sample that is representative of the EU industry as a whole.

Once a sample has been selected, the sampled companies will receive an injury questionnaire, which has to be completed within 30 days. Once the European Commission has analysed the questionnaire replies, it may ask companies for additional information.

Normally during the third or fourth month after initiation of the investigation, the Commission conducts verification visits at the premises of the producers. The purpose of such visits is to verify the data provided in the questionnaire replies. Provisional anti-dumping duties may be imposed before the investigation has finished, normally within seven months, but at the latest eight months after initiation. Provisional anti-subsidy duties may be imposed within nine months after initiation.

Three weeks before imposing provisional measures, the European Commission will make public on its website the intention to impose, or not, such measures so that interested businesses can plan ahead. At the same time as the publication of the provisional measures, interested parties will receive the so-called disclosure. The disclosure gives the details of all the facts of the investigation and the detailed calculations for the company concerned. Parties have 15 days to provide comments. Where provisional measures are imposed, they can remain in place for a maximum of six months in cases of anti-dumping duties and four months in cases of anti-subsidy duties before definitive measures are imposed or the investigation is terminated.

In anti-dumping cases, definitive measures are normally imposed at the latest 14 months after the initiation of an investigation (13 months in anti-subsidy cases). Companies will usually receive the definitive disclosure in the 12th month after initiation. The definitive disclosure contains all essential facts that form the basis for the final determinations and the detailed calculations regarding the company concerned. All comments received after the provisional disclosure are analysed and taken into account as appropriate in the definitive findings. Parties have ten days to comment.

The detailed findings of investigations are published in the Official Journal – for example, as a regulation imposing provisional or definitive anti-dumping/anti-subsidy duties or terminating the proceeding without duties being imposed.

Further, the European Commission publishes an Annual Report to the Council and the European Parliament on the EU's Anti-Dumping, Anti-Subsidy and Safeguard Activities and the use of trade defence instruments by third countries targeting the EU.

The European Commission can impose anti-dumping/anti-subsidy duties and safeguards on any third country (ie, countries that are not members of the EU).

Please refer to 5.4 Ad Hoc and Regular Reviews.

During the final year that measures are in force, the European Commission services publish a notice of impending expiry in the Official Journal stating that the measures will expire on a given date. The evidence in the request should support allegations of the likelihood of recurrence or continuation of dumping/subsidisation and injury with regard to the imports under measures.

If a substantiated review request is received, the European Commission publishes a notice of initiation and begins investigating whether or not dumping/subsidisation and injury are likely to continue or recur. Normally, expiry reviews are completed within 12 months, but they may take up to 15 months. During the investigation, measures remain in force.

An applicant can challenge the validity of an EU act of the Commission (for instance, anti-dumping duties) either by (i) filing an action for annulment of an act under Article 263 of the Treaty on the Functioning of the European Union (TFEU), or (ii) asking an EU member state court to request a preliminary ruling on the validity of an act under Article 267 TFEU.

An action for annulment under Article 263 TFEU is brought by an applicant before the General Court, and a judgment of the General Court can be appealed to the Court of Justice. If successful, the General Court (in first instance) or the Court of Justice (on appeal) annuls the contested act (fully or partially).

A request for a preliminary ruling under Article 267 TFEU is directed by a member state court, normally an administrative court in the case of challenges of anti-dumping duties, to the Court of Justice, in the framework of a national court proceeding. If successful, the Court of Justice invalidates the contested act.

In Sweden, there are on average one or two cases each year involving Swedish Customs Services bringing cases against importers that have circumvented AD/CVD measures (eg, incorrect classification or origin), which also end up in court proceedings. There have not been any high-profile cases in Sweden during the last 12 months.

Please refer to 5.12 Key Developments Regarding AD/CVD Measures.

As of today, Sweden has no foreign direct investment (FDI) screening rules. However, the government has commissioned a report for the purpose of proposing FDI screening rules. This report is to be published by November 2021. 

Sweden has however implemented an act and a complementing decree (Lagen (2020:826) med Kompletterande Bestämmelser till EU:s Förordning om Utländska Direktinvesteringar) that together implement the necessary rules on information gathering, etc, under the EU FDI screening regulation (Regulation (EU) 2019/452 of 19 March 2019). Under these new rules, the Inspectorate for Strategic Products may ask a target or investor to provide information on a foreign direct investment. The ISP may then share this information with other EU member states and the European Commission, as laid out in the regulation. Thus, investors and target companies in Sweden may be ordered to provide information to the ISP.

In addition, Sweden will have a form of national screening mechanism, as of 1 January 2021, whereby transfers of sensitive operations are subject to consultation with the Swedish Security Police (Säkerhetspolisen), also known as SÄPO, and, for certain specific areas, the Armed Forces (Försvarsmakten). This will apply regardless of the nationality of the party that acquires the operations. However, the scope of operations covered by this mechanism is quite narrow and limited to those operations subject to the Protective Security Act (Säkerhetsskyddslagen (2018:585) and its complementing decree (Säkerhetsskyddsförordningen (2018:658).

There are also specific obligations on foreign ownership in the following laws.

  • The Law on Acquisition of Land for Agricultural Activity (Jordförvärvslagen (1979:230)), which includes restrictions on who may acquire certain land for agricultural activity from an individual; authorisation is required for a legal person in most cases, and thus also for a foreign legal person. The objective of these rules is to protect certain parts of the Swedish countryside from commercial exploitation.
  • The Military Equipment Act, which includes restrictions on foreign ownership in relation to the ISP’s granting of authorisations for the manufacture and supply of military equipment in and from Sweden.

On the subject of investment security, please see the Sweden Trends and Developments chapter in this guide.

As of today, the main relevant government agencies that administer and enforce investment security measures are the ISP and Swedish Security Services (SÄPO).

As of today, such reviews are basically limited to the change of control in Swedish companies involved in the manufacturing and/or supply of military equipment. As of 1 January 2021, companies dealing with operations in sectors targeted by the Protective Security Act will also be subject to review.

Under both the Protective Security Act and the Military Equipment Act – particularly through any manufacturing or supply licences granted under that Act – a change of control in a legal entity covered by the scope of the relevant legislation is subject to notification requirements.

For the Protective Security Act, real estate and shares in companies that qualify as “public” companies (usually those traded on a stock exchange) will be exempt from the rules in the Protective Security Act.

Under the Protective Security Act, there are no penalties for failure to comply with the notification requirements at present. However, as of 1 January 2021, the failure to start the consultation procedure could amount to the transaction becoming prohibited (ie, null and void). See further under 6.9 Pending Changes to Investment Security Measures.

Under the Military Equipment Act, a failure to comply with a notification requirement may result in the company losing its manufacturing and/or supply licence with the ISP.

There are no fees associated with the change of control notification obligations described above.

In Sweden, the key developments regarding investment security in the prior 12 months mainly relate to the EU FDI screening regulation, its requirements and implementation; see 6.1 Investment Security Mechanisms.

Significant Pending Changes

Currently, there are two interconnected legislative initiatives for new FDI screening rules in Sweden, which run in parallel:

  • an inquiry (Direktinvesteringsutredningen) appointed to investigate and suggest legislation on the introduction of a comprehensive FDI screening procedure and blocking mandate, expected to deliver its final proposal in November 2021; and
  • a fast-tracked initiative, triggered by the COVID-19 outbreak, by means of a revamping of the Protective Security Act – the amendments have entered into force as of 1 January 2020.

Amendments to the Protective Security Act

According to the new rules, a seller of assets or shares in a company that engages in activities covered by the Act is obliged to consult with the competent authority. The Act covers “whoever is engaged in activities of importance to Sweden’s security or who is otherwise covered by a legally binding international commitment by Sweden regarding protective security”.

There is no clear definition of what activities and businesses are covered by the Act. According to the preparatory works, any examples given therein – including, for example, digital communication infrastructure, energy production and distribution, and emergency healthcare – are indicative, not comprehensive. It is the legislator’s expressed intention to keep the scope of what companies and activities are covered flexible and subject to change due to factors such as technical and geopolitical shifts.

A consultation process may result in the responsible authority either allowing the transaction, imposing conditions that need to be met for the investment/transaction to be allowed (besluta om föreläggande), or blocking the investment (meddela förbud). An agreement or item sold in violation of a blocking decision is automatically deemed null and void. A transaction completed without consultation with the responsible authority may be subject to subsequent review; should the authority find that the transaction ought to have been blocked, such a transaction may also be deemed null and void.

The consultation obligation is not limited to foreign buyers, but covers also Swedish buyers, including intra-group transfers. However, the following types of transactions are expressly excepted:

  • direct investments in real estate; and
  • the acquisition of shares in a Swedish public company – that is, a limited company which is registered as public under the Swedish Companies Act (Aktiebolagslagen (2005:551)), and whose shares can be sold to the public.

The new rules do not contain any rules on penalties for failure to comply with the requirements. However, if a transaction is considered null and void, the responsible authority is suggested to have a right to order both the seller and the buyer under the penalty of a fine (vid äventyr av vite) to take any measures needed to protect Sweden’s security.

The new rules contain no set time limit for the competent authority’s consultation process. Upcoming administrative directives may add procedural deadlines.

The EU state aid rules set the framework for Sweden’s ability to support certain activities with public funds. The EU rules are set out in articles 107 to 109 of the TFEU and stipulate that state aid is prohibited if it does not comply with certain pre-determined exceptions.

The public sector in Sweden may provide subsidies as long as the exceptions to the general prohibition in the Treaty are met. For the most commonly supported areas, there are guidelines that clarify the rules. For instance, this applies to regional aid and business areas such as research, development and innovation, employment, training, energy and environmental protection.

Generally, these support measures must be approved by the European Commission before they can be granted. However, the public sector may provide support to certain designated areas without first having to wait for the European Commission's approval. In order to do so, the aid must be designed in accordance with the requirements set out in the Block Exemption Regulations, (EU) nr 651/2014; see Legislation: block exemption regulations.

To the best of the author's knowledge, Sweden does not have any such specific standards and regulations in this regard.

To the best of the author's knowledge, Sweden does not have any such requirements in this regard.

To the best of the author's knowledge, Sweden does not have any such requirements in this regard.

To the best of the author's knowledge, Sweden does not have any such requirements in this regard.

To the best of the author's knowledge, Sweden does not have any such requirements in this regard.

On the basis of Article 107(3)(a) and (c) of the TFEU, the European Commission may consider compatible with the internal market state aid to promote the economic development of certain disadvantaged areas within the European Union. This kind of state aid is known as regional aid.

In Sweden, regional aid is more common within certain areas. For instance, aid is commonly given to regional airports, film production, broadband infrastructure, and sports infrastructure.

The European Commission has adopted a White Paper dealing with the distortive effects caused by foreign subsidies in the Single Market. The Commission opened a public consultation, which closed on 23 September 2020, to seek views and input from all stakeholders on the options set out in the White Paper to help the Commission to prepare for appropriate legislative proposals in this area.

Also, Sweden recently adopted new legislation in relation to the procedures for granting authorisation for electronic communication, introducing the possibility of conducting screenings for the protection of Sweden’s security (Sveriges säkerhet). 

The main purpose of the new provisions is to enhance security in 5G networks. This is done by introducing new provisions in the Law on Electronic Communications (Lag (2003:389) om Elektronisk Kommunikation). These new provisions are to introduce a legal basis for security screenings carried out by the Swedish Security Service (Säkerhetspolisen) or the Armed Forces (Försvarsmakten). These authorities will inform the Swedish Post and Telecom Authority (Post- och Telestyrelsen, PTS), whether to grant, deny, revoke or change an authorisation based on the security screening. 

In accordance with the new legislation, which entered into force on 1 January 2020, PTS recently announced that an examination of applications had been conducted in consultation with the Armed Forces and the Swedish Security Service, to ensure that the use of radio equipment in the 3.5 GHz and 2.3 GHz bands does not cause harm to the country's security, and that four entities have been approved for participation in the 5G spectrum auctions.

Moreover, PTS announced that it has decided on licence conditions that address the assessments made by the Swedish Armed Forces and the Swedish Security Service – for example, new installations and new implementation of central functions for radio use in the 3.5 GHz and 2.3 GHz frequency bands must not be carried out with products from the suppliers Huawei or ZTE.

This decision from PTS has led to judicial appeals as both Huawei and Hi3G Access (which is one of the four operators included in the PTS decision) have appealed the decision to the Administrative Court in Stockholm, where two legal procedures are currently ongoing.

Due to the judicial proceedings, the Swedish 5G auction process has been delayed but will likely occur during 2021.

Mannheimer Swartling Advokatbyrå AB

Östra Hamngatan 16
411 09 Gothenburg
Sweden

+46 31 355 1748

carolina.dacko@msa.se www.mannheimerswartling.se/en/
Author Business Card

Trends and Developments


Authors



Mannheimer Swartling has an extensive international practice, with an especially strong focus on the Nordic region. The firm employs over 400 lawyers, based in offices in Sweden, Belgium, Russia and the USA. The trade law practice consists of eight lawyers working together in the three Swedish offices as well as the Moscow and Brussels offices. It is organised under the corporate sustainability and risk management practice group, which systematically covers anti-corruption, data privacy, human rights and anti-money laundering. The trade group has vast experience in trade matters, covering customs, national security and foreign direct investment screening, trade defence measures and export control and sanctions. The group regularly handles matters before the authorities, including complex classifications and voluntary disclosures, as well as litigation before Swedish and European courts. The group also helps clients with risk assessments, compliance programmes and investigations; it has an extensive network and works with international trade law professionals in other jurisdictions.

Swedish National Security: Introduction

For decades, Sweden has been a free trade hardliner, often objecting to trade defence measures and focusing on dismantling trade barriers. Evidently, free trade and trade liberalisation has created prosperity. Despite being a small country, Sweden has successfully fostered many large multinational companies which now have a global presence. Aside from purely defence-related interest, the wider concept of national security has not been well-known in Swedish society or effectively regulated. Simply put, Sweden’s stance has been that restrictions on trade are always and everywhere a form of protectionism.

Recently, however, Sweden’s policy has pointed in a different direction. Certain foreign acquisitions and investments in Sweden, as well as the new EU rules on foreign direct investment screening, have triggered a new discussion in Sweden regarding the lack of rules to provide a safeguard from foreign investments that present security concerns.

As with many other countries in the EU, the COVID-19 crisis gave an extra impetus to rapidly introduce new rules allowing for screening of acquisitions. This, in turn, has brought new life to existing security rules, which have lacked effective monitoring or sanctions regimes. In parallel, Sweden also changed its laws on electronic communication, allowing more thorough security screenings for building 5G networks.

In short, as set out in this article, Sweden is facing multiple new legislative developments, revolving around the concept of national security (Sveriges säkerhet). The concept of "national security" is dynamic and left undefined in law, which reduces predictability as to when the authorities are likely to intervene in transactions between businesses. In the following sections, we set out the main new developments to look out for as they evolve into legislation and practice.

Sweden and the FDI Screening Regulation

The EU recently introduced rules on foreign direct investment screening, Regulation (EU) 2019/452, (the “FDI Regulation”), which legitimises existing investment screening rules in the member states and establishes a framework for sharing information on such investments into member states. The FDI Regulation also allows member states and the European Commission to comment on investments made in a particular member state. Such comments are to be provided during the process of national screening procedures. However, for an investment that has not undergone screening, comments can be made up to 15 months after the investment has been concluded (as in the case of Sweden).

Sweden scrapped its national FDI screening rules when joining the EU, and since then has not had any such rules in place. However, it is now aiming at adopting a new FDI screening mechanism sometime in 2022. A government inquiry was initiated in August 2019 for the dual purpose of (i) proposing national rules to complement the FDI Regulation, and (ii) proposing a new Swedish FDI screening mechanism (Direktinvesteringsutredningen; Ju 2019:06).

In March 2020, the inquiry published the first part of its report (SOU 2020:11). On the basis of this, the Swedish government introduced a new law based on which the Swedish Inspectorate for Strategic Products (the ISP) is designated as the EU contact point for the information-sharing mechanism in the FDI regulation. The law also allows the ISP to order private parties, both the target company and the foreign investor, to supply the information which Sweden may be required to share under the FDI Regulation.

The second, more substantial part of the inquiry’s report is to be presented before November 2021. This part of the report should contain a proposal for comprehensive Swedish FDI screening rules. What this will include remains to be seen.

In support of the inquiry’s work, the Swedish government has instructed the Swedish Defence Research Agency (Totalförsvarets forskningsinstitut, FOI), together with several other agencies, to map out what types of activities and businesses would fall within the scope of the FDI Regulation when applied to the Swedish context, as well as to suggest tools for evaluating risks relating to foreign direct investments in such activities and businesses. This report should allow businesses to understand whether they stand a risk of falling under the FDI Regulation’s scope. It may also serve as a starting point for mapping which Swedish businesses might be covered by the upcoming Swedish FDI screening rules.

New Change of Control Review in the Protective Security Act

While the Swedish inquiry into FDI rules was ongoing, the COVID-19 pandemic led to changing political dynamics and a sense of urgency in introducing some form of screening rules. The parliamentary process led to a proposal to change an existing law, the Protective Security Act (Säkerhetsskyddslagen, 2018:585), and to introduce a security review mechanism in that Act.

In 2018, a government inquiry committee had already looked into the possibilities of introducing control of ownership changes in companies covered by this act, but no further action was taken at that time. However, some parts of what that inquiry proposed were lifted into a legislative proposal, which have entered into force as of 1 January 2021. The amendments allow the designated governmental authority to prohibit a transaction if it is detrimental to Sweden’s security.

In sum, the new rules entail the following.

Scope – what businesses are covered

The Protective Security Act already covers businesses and other operations that are engaged in “activities of importance to Sweden’s security” or which otherwise are subject to “legally binding international commitment” made by Sweden in relation to protective security. These businesses already have to implement specific internal security measures as set out in the Act.

The term "protective security" is not defined clearly in the Act, but there are some guidance materials available to assist businesses to determine whether their operations fall under the scope of the Act. The preparatory works to the Act provide examples such as digital communication infrastructure, energy production and distribution, and emergency healthcare. Most likely, however, the scope of the Protective Security Act is narrower than that of the FDI Regulation, which lists broadly critical infrastructure, critical technology, etc.

The responsibility of analysing whether a business or part of a business operation is covered by the Act lies with the operators/companies themselves. Several different authorities are designated as responsible for monitoring that businesses, and others that are subject to the scope of the Act, do in fact comply with the Act.

Control mechanism – consultation

The new amendments introduce a control mechanism before a sale or transfer of operations, assets or shares in companies that are subject to the Act. It is important to note that this control mechanism covers all transactions, not only those involving a foreign buyer or investor.

If a business operation is covered by the Act, the new amendments require the operator to perform a specific security assessment and an assessment of the appropriateness of selling the operations or assets to a particular buyer. The seller is then obliged to consult the competent authority. The government has appointed the Swedish Security Services (Säkerhetspolisen) and the Swedish Armed Forces (Försvarsmakten), as competent authorities for the purpose of the consultation procedure.

Transactions in real estate and transactions involving share in a “public company” are to be exempted. Although it appears that the legislator may have wanted to exempt transactions involving publicly listed shares traded on the stock market, the definition of a “public company” allows for a broader exemption. The question of how to regulate public companies and acquisitions of companies by trading over the stock market are to be dealt with by the FDI inquiry.

Do the amendments cover indirect sales of shares?

Sales of companies often include more complex ownership structures. A transaction of an operative company that is covered by the Act may not involve the sale of the share of that company. Instead, the transaction may be done at the level of a parent of holding company further up in the ownership structure. To what extent such indirect sales of shares are covered is not yet defined.

The wording of the legal amendments covers the sale of stocks or other types of shares (aktier eller andelar) in companies engaged in activities covered by the Act. This could suggest that a sale of shares in, for example, a holding company that owns such a company is not covered, unless the holding company itself can be said to be engaged in such activities. Equally, it is unclear to what extent the new rules will have jurisdiction over transfers of assets or shares in a non-Swedish company that owns a Swedish company engaged in activities covered by the Act.

Some of these uncertainties will perhaps become clearer, either by guidance documents issued by the authorities or in practice, now that the new rules have entered into force.

The mandatory consultation procedure

The first step before commencing a sales transaction is to determine whether any part of the operations is covered by the Act. If covered, the business should perform a security analysis and assessment of the appropriateness of the transaction. These assessments have to be documented.

The business or the seller of shares has then to consult the Swedish Security Services or the Swedish Armed Forces. The consultation will be free of charge.

There are no formal time limits for the consultation procedure – the ordinary administrative rule is simply that matters should be handled in an expedited manner.

During a consultation process, the competent authority may, in addition to reviewing the security analysis and assessment of appropriateness, order the seller/applicant to supply additional information.

After the consultation process, the competent authority is free to either allow the transaction, to impose conditions that need to be met for the investment/transaction to be allowed (besluta om föreläggande), or to block the transaction (meddela förbud).

An agreement or asset sold in violation of a blocking decision is automatically deemed null and void. A transaction completed without consultation with the responsible authority may be subject to subsequent review; should the authority find that the transaction ought to have been blocked, such a transaction may be deemed null and void.

If a transaction has been deemed null and void, the responsible authority will have a right to order both the seller and the buyer under the penalty of a fine to take the appropriate measures needed to protect Sweden’s security.

Decisions by the competent authority may be appealed, either to court (orders and decisions under the consultation process) or directly to the Swedish government (blocking decisions).

What are the risks with non-compliance?

Under the amendments, consultation with the competent authority is mandatory. The evident risk of not complying with the consultation requirements is that the transaction in question is later deemed blocked and thereby null and void. If so, there is a risk of being ordered under the penalty of a fine to take measures needed to protect Sweden’s security (unwinding the deal).

In sum, much of how the new rules will be applied is to be determined in guidance and in practice by the competent authorities. Furthermore, the evolution of how these new rules will apply will likely be a useful experience both for businesses and authorities in shaping Sweden’s new FDI screening rules (ie, under the ongoing inquiry). This is, indeed, one to watch.

New National Security Considerations in the Granting of Electronic Communication Licences and the “5G Decision”

In a parallel legislative development, Sweden recently introduced a new provision on Swedish security in the procedures for granting authorisation for electronic communication. The main purpose of the new legislation, which entered into force on 1 January 2020, is to enhance security in 5G networks. This is done by introducing new provisions in the Law on Electronic Communications (Lag (2003:389) om Elektronisk Kommunikation, LEK), and the Law on Publicity and Confidentiality for Authorities (Lag (2009:400) om Offentlighet och Sekretess, OSL).

According to LEK, authorisations for radio use (ie, using a specific radio transmitter or using radio transmitters within a specific frequency spectrum) shall be granted under certain prerequisites. Previous to the recent changes in the legislation, there was no way to prevent an authorisation for radio use on the grounds of Sweden’s security.

However, the new provisions add a prerequisite, namely that “it may be assumed that the radio use will not cause harm to Sweden’s security”. Thus, if the Swedish Post and Telecom Authority (Post- och Telestyrelsen, PTS), the competent authority for granting licences for radio use, cannot assume that there is no security risk, the licence should not be granted. This is based on the idea that a specific authorisation may have to be combined with conditions to prevent a threat to Sweden’s security. Otherwise, the application should be dismissed.

Although the concept of "Sweden’s security" is left undefined, LEK refers to the concept found in the Protective Security Act. This gives the authorities a relatively broad mandate and flexibility in its decision-making and security assessments.

The new provisions do, however, introduce a legal basis for security screenings carried out by the Swedish Security Service or the Armed Forces. These authorities will inform the PTS whether it should grant, deny, revoke or change an authorisation based on the security screening. Furthermore, the PTS has the possibility to immediately withdraw an authorisation or change the conditions for security reasons even when the holder of the authorisation is in compliance with its authorisation, the conditions of the authorisation and applicable law.

In accordance with this new legislation, PTS recently announced that an examination of applications had been conducted in consultation with the Armed Forces and the Swedish Security Service, to ensure that the use of radio equipment in 5G would not cause harm to Sweden's security. Furthermore, PTS announced that four entities have been pre-approved for participation in the 5G spectrum auctions, provided that their licences for radio use would contain specific conditions on what suppliers would be used in the building of their 5G networks.

This decision included pointing out specific suppliers of telecommunication equipment that could not be used and that equipment from these suppliers had to be phased out during a transitional period.

Looking Forward

The year 2021 will be an interesting one, during which we will be given guidance on the legal term "Sweden’s security". The new amendments to the Protective Security Act will start to apply and be used in practice during 2021. These rules will need to be further clarified to provide predictability both in terms of coverage and procedure.

The inquiry into new Swedish FDI screening rules will likely present its results during the second half of 2021. Businesses will then be able to comment on the new proposed rules, before new legislation is introduced.

The PTS decision on 5G, which is based on the same legal term, "Sweden's security", has already been subject to substantial controversy, intense media attention and judicial review which may, in turn, shed light on the term and how the authorities should act.

There is good reason to follow both the legislative and legal developments in this area, as Sweden departs from its previous hardline free trade stance and enters into a new era of using national security as justification for governmental intervention.

Mannheimer Swartling Advokatbyrå AB

Östra Hamngatan 16
411 09 Gothenburg
Sweden

+46 31 355 1748

carolina.dacko@msa.se www.mannheimerswartling.se/en/
Author Business Card

Law and Practice

Author



Mannheimer Swartling has an extensive international practice, with an especially strong focus on the Nordic region. The firm employs over 400 lawyers, based in offices in Sweden, Belgium, Russia, and the USA. The trade law practice consists of eight lawyers working together in the three Swedish offices as well as the Moscow and Brussels offices. It is organised under the corporate sustainability and risk management practice group, which systematically covers anti-corruption, data privacy, human rights, and anti-money laundering. The trade group has vast experience in trade matters, covering customs, national security and foreign direct investment screening, trade defence measures and export control and sanctions. The group regularly handles matters before various authorities, including complex classifications and voluntary disclosures, as well as litigation before Swedish and European courts. The group helps clients with risk assessments, compliance programmes and investigations; it has an extensive network of international trade law professionals in other jurisdictions.

Trends and Development

Authors



Mannheimer Swartling has an extensive international practice, with an especially strong focus on the Nordic region. The firm employs over 400 lawyers, based in offices in Sweden, Belgium, Russia and the USA. The trade law practice consists of eight lawyers working together in the three Swedish offices as well as the Moscow and Brussels offices. It is organised under the corporate sustainability and risk management practice group, which systematically covers anti-corruption, data privacy, human rights and anti-money laundering. The trade group has vast experience in trade matters, covering customs, national security and foreign direct investment screening, trade defence measures and export control and sanctions. The group regularly handles matters before the authorities, including complex classifications and voluntary disclosures, as well as litigation before Swedish and European courts. The group also helps clients with risk assessments, compliance programmes and investigations; it has an extensive network and works with international trade law professionals in other jurisdictions.

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